Barrons says Amazon “is Smoking”

What do things look like for Amazon — both now, and in the future? Today two technology analysts delivered their verdict: “Amazon is Smoking with Kindle”. That’s the headline at Barrons.com, in their “Hot Research” column, highlighting a report by Stan Velikov and Sandeep Aggarwal. They’re predicting that the number of Kindles Amazon sells in 2012 will be more than double the number of Kindles that they sold just last year — and that for the next 12 months, Amazon’s Kindle sales will increase by more than 50%.

“In our view,” the two analysts write, “Kindle remains the best ebook reader in the market and competition is unable to dent its market share.” They predict that over the next year Amazon will spend more money on Kindle advertising — and they think it’s a good idea, arguing that Amazon is just “strengthening its competitive moats.” They’ve also upgraded their past estimates for Amazon’s sales of the Kindle. For last year they now believe that Amazon sold a whopping 6.1 million Kindles, earning them $3.31 billion in Kindle-related revenues. Yet for this year, Barrons estimates that Amazon will sell more than 50% more Kindles than last year — earning revenues of $5.53 billion by selling another 9.3 million Kindles by the end of the year!

But what’s even more interesting is that comes out to an average of more than $500 per Kindle! I’m not sure what to make of those numbers — even if you remember that the Kindle 2 cost $260 for the first half of 2010. They’re still predicting an even higher average revenue of $594 per Kindle in 2011, when most Kindles will be much cheaper. (The Kindle 3G costs just $189, and there’s also the cheaper $139 model). It seemed like they’re estimating that the average Kindle owner spends at least $300 a year purchasing ebooks — until I remembered remember that the larger Kindle DX costs $379. But even if half the Kindles purchased were the more expensive Kindle DX, Barrons is still estimating that the average Kindle owner spends a lot of money on ebooks — about $240 apiece. I guess that’s possible — that’s $20 a month, or about two $9.99 books every month. And of course, the price of ebooks is also rising, which seems to be reflected in their estimates for the future.

So what happens in 2012? Barrons predicts that 12.5 million Kindles will be sold! (That’s twice as many as in 2010, now earning Amazon another $7.96 billion in revenue.) And these predictions are especially significant, because Barrons is the official newspaper of Dow Jones & Company (which also publishes the Wall Street Journal). In fact, Clarence W. Barron, the man the newspaper is named after, is considered “the founder of modern financial journalism,” according to Wikipedia. Barrons is publishing research from an investment firm, so it’s not the official opinion of Barrons.com.

But it’s still an authoritative prediction that Amazon’s Kindle sales…are smoking!